2023-08-31 12:55:11
(Washington) Inflation started to accelerate again in July in the United States, after two months of slowdown, as did consumer spending, despite the efforts of the American central bank, the Fed, to weigh on economic activity and try to ease the pressure on prices.
The increase in consumer prices was 3.3% over one year against 3% in June, and is stable over one month, at 0.2%, according to the PCE index, the measure favored by the Fed.
“Goods prices fell 0.3% and services prices rose 0.4%,” detailed the Commerce Department, which released the data on Thursday.
Excluding volatile energy and food prices, so-called core inflation is also accelerating, to 4.2% over one year from 4.1% in June. It is this measure that the Fed wants to reduce to 2.0%.
Inflation measured by the PCE follows the same trend as that of the CPI index, published earlier in the month. CPI inflation had climbed to 3.2% year on year in July, from 3.0% in June.
The question now is whether or not the Fed will continue to raise its key rates, as it has done 11 times since March 2022, taking them to the highest in 22 years.
As a result, banks offer loans at higher rates to households and businesses, which are less inclined to consume or invest, which eases pressure on prices.
“A broader slowdown in demand has not occurred despite the sharp rise in interest rates,” said Ben Ayers, economist for Nationwide Insurance Company.
And for him, “what is even more worrying is a further rise in the underlying PCE, as housing and service costs do not seem to be affected by the Fed’s rate hikes”. This could “put another rate hike back on the agenda” at the next Fed meeting in late September.
Savings melted away
By contrast, Gregory Daco, chief economist for EY, expects “the Fed’s tightening cycle to be over” because while rising incomes “have ensured the resilience of consumer spending over the year elapsed, the dynamic seems to be reversing as employment and wage growth slow down”.
Economic activity has indeed withstood this forced slowdown.
Household spending also increased faster in July (+0.8% against +0.6% in June), in particular to pay for financial and insurance services, as well as rents which have soared since the pandemic. , or buy pharmaceutical products or recreational items.
But their incomes increased less than in June (+ 0.2% against + 0.3%).
And starting in October, the many Americans who had taken out student loans will have to start repaying again, after a three-and-a-half-year hiatus related to COVID-19.
This “will probably weigh heavily on consumption in the fourth quarter”, warns Ian Shepherdson, chief economist of Pantheon Macroeconomics, especially since “more than three quarters of the excess savings accumulated during the pandemic have now been spent”.
US employment figures for August will be released on Friday. A slowdown in hiring is expected, as well as in wage increases.
This would signal an improvement in the situation on the labor shortage front that the country has been experiencing for more than two years, and which had contributed to the surge in inflation.
In the euro zone, inflation remains stronger than in the United States, and remained stable in August at 5.3% over one year, according to data also published Thursday, by Eurostat.
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